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President Obama's proposed new regulations on banks are confusing, and for good reason: neither he nor Congress, which must ultimately hash out and approve the details, have explained how they would work. What he has said is that he wants to limit the sizes of banks, so that they do not become "too big to fail," and to halt proprietary trading. The latter would bar commercial banks from dealing in high-risk assets like hedge funds or private equity funds. The newly populist regulatory proposals have sparked heated debate across the ideological spectrum. After all, such significant restrictions on the massive U.S. banking industry could bring sweeping changes to the entire financial system.

Everyone feels strongly about this, weighing down furiously either for or against. Except for The Atlantic's Megan McArdle. McArdle provides remarkably detailed, and remarkably cool-headed, examinations of the many ins-and-outs of what bank limits would mean for the American finance as well as American politics. After poring over the details, she explains the broader, interconnected whole:

But even if it's not the best idea in the world, there are definitely many worse rules that we could think up.  And after a stunning defeat on health care, the administration needs to score big points against the bankers quickly.  If "Don't just stand there, do something!" is the order of the day, there are clearly worse somethings we can do.

If we do choose this "something", Americans should probably be clear that this is going to deal a major setback to New York as a world financial capital.  Many of the rules that were undone in the last two decades were got rid of because they were making it too hard for American banks to cope with foreign competition.  If we do this, America's financial sector will shrink, and our banks will lose a lot of business to foreign firms. [...]

That doesn't mean we shouldn't do it.  I think finance has taken on an outsized role in our country, and as we've seen over the past year and a half, that hasn't been a healthy state of affairs.  But this means a substantial change to the American financial system, and as with all change, we won't like every single thing that follows.

Discussing bank regulation, an issue virtually guaranteed to provoke a fiercely ideological response, McArdle with expertise and a clear eye. She makes it clear where she stands, but carefully accounts for differing views. Most commendably, she admits when there is something she doesn't know--a forbidden gesture in the blogging world.

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